CRN’s VARBusiness ran a nice story on SaaS the other day.
… Software-as-a-service applications from Google, Yahoo, and Salesforce.com are driving change in architecture, appearance and business model of enterprise applications, turning the sector from a niche into a multi-billion dollar market. But the business model isn’t without its challenges.
Calling the trend a "disruptive phenomenon," Merrill Lynch & Co. analyst Kash Rangan said in a report released Friday that upstarts, such as Salesforce.com, WebEx, RightNow, Taleo, Blackboard and NetSuite, will benefit most, compared with traditional software players Microsoft, SAP and Oracle attempting to move into the space.
Part of the disruption will come from the method in which traditional software companies recognize revenue from SaaS sales, according to AMR Research Inc. senior vice president Jim Shepherd. "If SAP sells a system today for $1 million, they recognize the million dollars on the day they sell it and it goes into the revenue for that quarter," he said. "If they were to sell that same system as a software as a service, they may get $20,000 per month for the next 10 years."
The same dollar amount is spent on applications, but logged in accounting books differently under the SaaS business model. Assuming there’s a strong demand for these services, it could have a negative short-term impact on license revenue at traditional software vendors, Shepherd said.
That’s part of the reason Microsoft, Oracle and SAP didn’t rush into offering these services offerings, which companies like Intuit Inc. have been offering for years ….
Although in general the author is right by stating that “pureplay SaaS vendors” may seem more flexible with regards to their business model when it comes to SaaS, I don’t think the article fully takes Microsoft’s efforts in this field into account.
For one WebEx is mentioned as a company that benefits most. As you may know Microsoft acquired PlaceWare a few years ago and turned this service into Microsoft LiveMeeting; one of the most successful Web conferencing services offered today (here and here).
Next to Services in Office System, also Windows Live is introduced and Microsoft officially launched its first service earlier this week : Windows Live Messenger which in the first 36 hours after the launch had over 2,4 million downloads; hmmm that’s quite successful isn’t it.
Currently there a huge list of Windows Live Services in Beta and planned. All in all Microsoft is right on track on becoming s strong SaaS player if you ask me …
